Professional Documents
Culture Documents
Accommodation for the interim period. To bridge the gap to meet an urgent need
Bridge Financing
of
Consortium Financing or Participation Loan is an arrangement where a number of banks join together to arrange funds for the borrower. To disperse the risk. Against a common security. A consortium agreement is drawn specifying the mode of sharing risk and remuneration.
Consortium Financing
RUNNING FINANCE
Normally a business loan. This meets the days to day requirements of the customer. Mark-up is charged on the utilized amount. It is granted against hypothecation of stocks. Mark-up is charged on quarterly basis.
CASH FINANCE
Normally a business loan. This meets the seasonal requirements of the customer like sugar & cotton. Mark-up is charged on the utilized amount. It is granted against pledge of stocks depending upon the nature of the goods. Mark-up is charged on quarterly basis.
DEMAND FINANCE
Normally a business loan. This meets the requirements of the BIG customer to setup factories like sugar & cotton. Mark-up is charged on the full amount. It is granted against mortgage of fixed assets. Mark-up is charged on bi-annual basis.
Bills Purchased:
A financing facility against a suitable margin of security Bank holds the bill as security till the time it gets mature. Bank does not becomes the purchaser or owner of the bill.
Bills Discounted:
For Usance & Sight Bills. Given to only selected customers Discount is being deducted before grant of value
Letter of Credit
An L/C is a written undertaking by a bank (issuing bank) given to the seller (beneficiary) at the request, and in accordance with the buyers (applicant) instructions to effect payment that is by making a payment, or by accepting or negotiating bills of exchange (drafts) up to a stated amount, against stipulated documents and within a prescribed time limit.
Parties to L/C:
The Applicant (importer) Opening Bank or Issuing Bank Advising Bank Beneficiary (Exporter) Confirming Bank Negotiating Bank Reimbursing Bank
ii.
iii. iv. v. vi. vii. viii.
Draft Commercial Invoice Bill of Lading Air Waybill Insurance Policy or Certificate Certificate of Origin Inspection Certificate Packing List
Shipment of Goods 5. Presentation of Documents by Beneficiary 6. Sending Documents to the Issuing Bank 7. Delivering Documents to the Applicant
4.
Revocable L/C Irrevocable L/C Irrevocable Confirmed L/C Revolving Credit Transferable Credit Back to Back Credit Red Clause or Packing Credit Stand by Credit L/C L/C L/C L/C available available available available by by by by Negotiation Acceptance Sight Payment Deferred Payment
Modes of Payment:
A transferable L/C allows the beneficiary to act as a middleman and transfer his rights under an L/C to another party or parties who may be suppliers of the goods. Depending on whether the L/C permits partial shipments, fractional amounts may be transferred to more than one beneficiary. The L/C however, can be transferred only once: the secondary beneficiaries cannot transfer their rights to a third party. Transfer of an L/C can be made on specific application by the original beneficiary. The applicant should be aware that any second beneficiary, the probable supplier, is usually a party not likely known to the applicant. The terms and conditions of the transferred L/C must be identical to those of the original L/C with the following exceptions:
The original beneficiary may be shown as the applicant on the transferred credit. The amount of the L/C, and unit prices if any, may be less than in the original L/C. (the diff. being the original beneficiarys profit margin). The latest shipment date, if any, and expiry date as shown on the original letter of credit should be shortened. The percentage of insurance coverage, if any, should be increased to satisfy the requirements of the original letter of credit. When a drawing takes place, the original beneficiary normally substitutes his invoices for those of the second beneficiary for up to the amount and unit prices available under the original L/C, and draws the difference as profit.
A red clause letter of credit incorporates a clause, traditionally written in red, which authorizes the bank acting as the negotiating or paying bank to pay the beneficiary in advance of shipment. This enables the purchase and accumulation of goods from a number of different suppliers, and the arrangement of shipment in accordance with the L/C terms. Such advances will be deducted from the amount due to be paid when the documents called for are presented under the L/C. If the beneficiary fails to ship the goods or cannot do so before the expiry of the letter of credit, the issuing bank is bound to reimburse the negotiating or paying bank, recovering its payment from the applicant. Variations of such credits may also require that any advances be secured by temporary warehouse receipts until shipment is effected. Beneficiaries of red clause letters of credit are invariably brokers/agents of buyers in a particular field.
Broad Classification:
Sight L/C Usance L/C
Documents required:
L/C Form IB-8 Indent / Proforma Invoice / Purchase Order duly confirmed by the Counter Party Issuance Cover Note / Marine Insurance Policy Form I
General Principles of UCP Letters of credit are separate transactions from the sales or other contracts on which they may be based, and banks are in no way involved with or bound by such contracts, even if reference to them is included in the letter of credit. In letters of credit transactions, all parties deal with documents and not with the underlying contracts to which the documents may relate. Before payment or acceptance of drafts is effected, banks bear the responsibility for examining the documents to ensure that they appear on their face to be in accordance with the terms and conditions of the letter of credit. Banks bear no responsibility for: the form or genuineness of documents; for the goods described in the documents; or the performance of the seller of the goods.